37 Section 80-IA – Appeal to Appellate Tribunal – Limitation – Order of revision and consequential order of assessment – Appeals from both orders – Tribunal considering appeal from order of assessment – Dismissal of appeal from order of revision on ground of limitation – Not valid Industrial undertaking – Special deduction u/s. 80-IA – Undertaking engaged in distribution of electricity – Computation of profits for purposes of deduction – Penalty recovered from suppliers for delay in execution of contracts, unclaimed balances of contractors, rebate from power generators and interest on fixed deposits for opening letter of credit to power grid corporation includible in profits – Miscellaneous recovery from employees, difference between written down value and book value of released assets, commission for collection of electricity duty and rental income not part of profit

Hubli
Electricity Supply Co. vs. Dy. CIT; 404 ITR 462 (Karn); Date of order : 9^th
February, 2018

A.
Ys.: 2006-07 to 2008-09

The
assessee, a wholly owned company of the Government of Karnataka was engaged in
the business of distribution of electricity. The assessee was entitled to
deduction u/s. 80-IA of the Income-tax Act, 1961 (hereinafter for the sake of
brevity referred to as the “Act”). In the A. Y. 2006-07, it treated
as “income from profits and gains of business” penalty for delay in execution
of work by contractors, rebate from power generators, interest from fixed
deposits, the difference between the written down value and the book value of
assets, commission for collection of electricity duty, rental income, and
miscellaneous recovery from employees. The claim was accepted by the Assessing
Officer. Thereafter the Commissioner invoked the provisions of section 263 of
the Act and set aside the scrutiny assessment, without directing a fresh
assessment. A belated appeal filed against the order of revision was dismissed
by the Tribunal on the ground of limitation. Subsequently, the consequential
assessment order u/s. 143(3) read with section 263 of the Act was passed by the
Assessing Officer disallowing the said claims. The Assessee’s appeal was
dismissed by the Commissioner. The assessee filed further appeal before the
Tribunal. In the mean time, assessment orders for the A. Ys. 2007-08 and
2008-09 were concluded on the same lines, disallowing the deduction u/s.
80-IA(4)(iv)(c) and treating the items of income claimed as “other income” and charging
them to tax. Against these matters, the appeals were filed before the Tribunal.
All these appeals were clubbed together, heard and disposed of by a common
order. The Tribunal accepted some of the claims by the assessee.

On appeal,
the Karnataka High Court held as under:

“i)  The dismissal of the appeal by the Tribunal on
the ground of limitation without going into the merits of the case was
unjustifiable when the issue was considered on merits while adjudicating the
consequential orders.

ii)   The penalty recovered from suppliers and
contractors for delay in execution of works contract, unclaimed balances
outstanding pertaining to security deposits of contractor written back in the
books of account, rebate from power generators, interest income (fixed deposit
for opening of letter of credit to Power Grid Corporation Ltd.) had to be taken
into account while computing the deduction u/s. 80-IA(4).

iii)  Miscellaneous recovery from employees, the
difference between the written down value and book value of released assets,
commission from collection of electricity duty and rental income could not be
taken into account while computing the deduction u/s. 80-IA(4).”